Why you shouldn’t raise too much money in your early funding rounds

Edited excerpt from What I’ve Learned About Venture Funding by Mark Suster:

I believe firmly in capital efficiency in the early days of a startup. It forces innovation. It forces the founder to spend time in front of customers. It forces teams not to expand too quickly. I know it’s easier said than done when capital is floating around and feels like it will ease up everything. I don’t blame you for taking more than you need. But if you take $10 on $30, $40 or even $50 G-d help you if you need to raise your next round and haven’t demonstrated amazing traction or you raise after the next correction. You are building a one-option startup. And I can tell you that almost certainly you will spend your money inefficiently.

Notes:
(1) Cf. Tom Tunguz’ five keys to building a successful company.
(2) Cf. Why capital efficiency is critical for SaaS and subscription businesses.

2 thoughts on “Why you shouldn’t raise too much money in your early funding rounds

  1. Pingback: Why more funding won’t help you find product-market fit | A Founder's Notebook

  2. Pingback: Why you should bootstrap your startup before raising money | A Founder's Notebook

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